A recent decision from the Ontario Court of Appeal is a reminder that when employees create intellectual property, employer ownership isn’t automatic
In Nexus Solutions Inc. v. Krougly, 2025 ONCA 199, the Ontario Court of Appeal confirmed that software developed by an employee outside work hours, not requested by the employer, that directly competed with the employer’s business and with no written agreement, belonged to the employee, not the company.
For many employers, that result will feel counterintuitive. It was described by the trial judge as “harsh.” But it was also entirely predictable based on how the employment relationship had been structured.
The employee, a senior software developer, worked on a specific product for his employer. There was no written employment agreement. There were no intellectual property assignment provisions. There were no clear restrictions on side projects.
While still employed, he developed a competing software product on his own time, using his own resources. After resigning, he attempted to market that product, including to the employer’s clients.
The employer argued that it owned the copyright under the Copyright Act, which generally provides that works created “in the course of employment” belong to the employer.
The Court of Appeal disagreed.
The key issue was not whether the work competed with the employer. It was whether the employee had been asked, expected, or required to create that...
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